Without a doubt, the capital markets environment during 2011 has been highly unusual, marked by extremes and contradictions, great uncertainty and much volatility. For example, on the one hand, credit is plentiful — banks and insurance companies are willing to lend at record-low rates to companies that do not need the money. On the other hand, these same lenders are unwilling to extend credit to unseasoned companies. The public equity markets, with a few exceptions, have been generally cruel to companies needing to issue new equity, and the IPO market has effectively disappeared. Finally, private equity funds flush with cash are ready to make new investments, but have had difficulty closing deals due to valuation or financing reasons.

Despite these headwinds, we still see opportunity for our clients. There is a strong market for great companies to be sold to strategic buyers or recapitalized with private equity, and fundamentally sound companies can refinance debt at lower interest rates with looser covenants. Also, select distressed situations are giving strategic buyers the opportunity to make add-on acquisitions on very favorable terms. These types of situations, however, do not materialize on their own — they need to be created.

Like the unusual nature of this year, I would like to discuss three interesting projects we worked on that are somewhat outside of the typical Kerlin assignment. All of them, I believe, are illustrative of creative investment banking thinking and resourcefulness.

Having emerged from bankruptcy, Hostess Brands was looking to divest Mrs. Cubbison‘s stuffing, a West Coast brand and a non-core operation, in order to further reduce its debt. Kerlin developed this strategic opportunity for its client, Sugar Foods, which was looking to expand its presence in different areas of the supermarket, and helped pre-empt an expected auction process. Within a very tight timeframe, Kerlin helped the Sugar Foods team negotiate a comprehensive transaction which included multiple co-packing agreements. These agreements were critical for an orderly transition and needed to be completed in time for the 2011 holiday season.

The next situation evolved more slowly, morphing from a simple strategic options review into a much more complex and hands-on assignment. Kerlin was retained by a family trust to review an underperforming asset: a $45 million note secured by the operations and land lease for a regional FBO. Though this business had suffered significantly during the economic downturn in concert with the rest of the private aviation market, it retained solid fundamentals and a reasonable prospect for recovery. Kerlin developed a strategy for recovery and then assisted with the negotiation of a series of forbearance agreements. Kerlin also helped the note holder evaluate the underlying collateral, the solvency of the debtor, and ultimately renegotiate the note with enhanced collateral as well as significant personal guarantees which should measurably increase the trust‘s prospect for recovery.

The final situation involved a long-time Kerlin client that had acquired an outstanding $47 million subordinated note with a fixed 8% interest rate. Wishing to take advantage of lower interest rates and because the company‘s credit had improved materially, the client expected to call the notes and refinance with new senior debt. The note holders, however, did not wish to be called since it would require them to pay capital gains on the original sale. Kerlin evaluated all of the options and developed one that proved to be a win-win for all the parties. The solution centered on developing a process whereby Kerlin approached the note holders and negotiated a new interest rate of 5.75%. With everyone in agreement, the new financing preserved the subordinated debt in the capital structure, reduced interest expense by 29% and gave the note holders the ability to defer the capital gains taxes.

While we of course remain focused on our traditional M&A and restructuring work for both private and public companies, these three examples demonstrate how we have helped create market-driven opportunities for our clients regardless of the market environment around us.

Finally, I have one more piece of news to share with you. Drew H. Webb has rejoined Kerlin as a Senior Advisor after spending three years as Chief Operating Officer of Farmer Bros. Drew spent ten years with Kerlin before going to Farmer Bros. and we are delighted to have him back. Drew was formerly an executive for ConAgra‘s largest division responsible for M&A and corporate development, and he also previously served as an executive of Basic American Foods. Drew‘s skills and unique experience will be invaluable to our clients especially in the M&A integration planning area. Our senior bankers, together with Drew, bring in-depth strategic advice to our clients as part of the deal process.

The $45 million acquisition makes Farmer Bros. the nation’s largest direct-store delivery business for coffee and allied products, with service to all 48 mainland states.

“We are pleased to welcome more than 20,000 customers and 700 employees to Farmer Bros.,” said Rocky Laverty, President and Chief Executive Officer. “We are looking forward to successfully integrating our businesses and profitably capitalizing on this once-in-a-lifetime opportunity for market leadership.”

The acquisition is being financed with cash and a credit line from Wachovia Bank. Kerlin Capital Group, LLC of Los Angeles acted as financial advisor for Farmer Bros. in the transaction, and Anglin, Flewelling, Rasmussen, Campbell & Trytten LLP was legal advisor for Farmer Bros.

About Farmer Bros.

Farmer Bros. Co. is the nation’s largest direct-store delivery business for coffee and allied products such as cappuccino, cocoa mixes and spices. It roasts and packages coffee for more than 10 brands; it processes and packages allied products; it directly delivers its products and services to food service operators and retailers in all 48 mainland states. It also provides private-label coffee programs to retailers through Coffee Bean Intl., one of the nation’s leading specialty coffee roasters. Farmer Bros. has paid a dividend in every year since 1953, and its stock price has risen on a split-adjusted basis from $1.80 a share in 1980. For more information, go to: www.farmerbroscousa.com.

Forward-Looking Statements

Certain statements contained in this press release regarding the risks, circumstances and financial trends that may affect our future operating results, financial position and cash flows are not based on historical fact and are forward-looking statements within the meaning of federal securities laws and regulations. These statements are based on management’s current expectations, assumptions, estimates and observations of future events and include any statements that do not directly relate to any historical or current fact. These forward-looking statements can be identified by the use of words like “anticipates,” “feels,” “estimates,” “projects,” “expects,” “plans,” “believes,” “intends,” “will,” “assumes” and other words of similar meaning. Owing to the uncertainties inherent in forward-looking statements, actual results could differ materially from those set forth in forward-looking statements. We intend these forward-looking statements to speak only at the time of this report and do not undertake to update or revise these statements as more information becomes available except as required under federal securities laws and the rules and regulations of the SEC. Factors that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to, fluctuations in availability and cost of green coffee, competition, organizational changes, our ability to successfully integrate both DSD and the CBI Acquisitions, the impact of a weaker economy, business conditions in the coffee industry and food industry in general, the Company’s continued success in attracting new customers, variances from budgeted sales mix and growth rates, weather and special or unusual events, and changes in the quality or dividend stream of the third party’s securities and other investment vehicles in which the Company has invested its short-term assets, as well as other risks described in this press release and the annual report filed by the Company on Form 10-K and other factors described from time to time in the Company’s filings with the SEC.